As a business owner, you need to be an expert not only in the field of business you are in but also when it comes to managing your taxes. For beginners in the industry, preparing their company taxes is not easy. There are many things to organize and rules to follow. Those who are not familiar with the job and their local government’s tax regulations might encounter some pitfalls along the way.
Knowing the possible mistakes is still the best way to avoid them. Here are some of the most common ones businesses should learn to avoid.
1. Filing Wrong Deductions for Your Startup Costs
Most newbie entrepreneurs often overestimate their deductible startup costs. They assume that all their business-related expenditures can be deducted from their tax returns, which is not the case.
As with the individual tax return, you can only claim your actual cost for business use. That does not mean you can claim the full price tag for your property, office equipment, utilities, and more.
Before claiming your property as a business asset, you must ensure that it is necessary for your business and used regularly. You can only deduct your property’s depreciated cost.
If you doubt whether you should or should not be claiming a particular property or equipment, it would be best to consult with your accountant and tax return preparer first.
2. Failing to Declare the Proper Business Entity
States have different requirements when it comes to declaring a business entity. The business entities may also differ in their tax liabilities and benefits. Before registering your business entity, you should first consult with a lawyer to make sure that you are choosing the best entity.
Professional business consultants will help you determine the best option. You will also be provided with a step-by-step plan to do it.
3. Mixing Personal and Business Money
It is common for new business owners to mix their personal and business finances. It is not a good thing, though. Doing so can get you in trouble with the IRS. If you do not keep them separate, you will have difficulty determining if you were supposed to pay taxes on personal or business-related transactions.
Go through all your accounts and separate your personal and business spending to be on the safe side. You can assign a different bank account for your business expenses. You will also have to ensure that your business credit card is used only for business-related purchases.
4. Failing to Pay on Time
It is as easy to overlook your tax filing as it is to forget about your monthly phone bill. For businesses, however, paying your taxes on time is not optional. Failing to do so can land you with hefty fines and penalties. It can also cost you your business license.
To avoid this, you have to prepare yourself financially and make sure that you are always ready to pay on or before the due date. You can use accounting software and plan ahead of your payments.
If you are also a newbie business owner, you want what is best for your business and yourself. You want to avoid getting into trouble with the IRS. You also have a lot on your plate. You have to set up and run your business and prepare your tax return. It can be stressful, especially if you are not familiar with the process. With proper guidance and planning, you can set yourself up for future success.
If you already have tax problems you need solutions to, we can help. Axiom Tax Resolution Group has tax resolution specialists that can help you avoid all mistakes possible when it comes to tax preparation. Contact us today to know how we can help.